VALUEFIN INDIA CREDIT SERVICES PRIVATE LIMITED KYC & AML ... AML Policy.pdf · 3.3 Officially valid...

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VALUEFIN INDIA CREDIT SERVICES PRIVATE

LIMITED

KYC & AML POLICY 2018-19

VERSION 1.0


This policy is made as per the RBI Master Direction DBR. AML.BC.No.81/14.01.001/2015-

16 dated February 25, 2016 and will be updated as an when new guidelines and

instructions are issued by Reserve Bank of India.

I. 'Know Your Customer' (KYC) Guidelines – Anti Money Laundering Standards

Introduction

The ‘Know Your Customer’ guidelines were issued in February 2005 revisiting the earlier

guidelines issued in January 2004 in the context of the Recommendations made by the Financial

Action Task Force (FATF) on Anti Money Laundering (AML) standards and on Combating

Financing of Terrorism (CFT). These standards have become the international benchmark for

framing Anti Money Laundering and combating financing of terrorism policies by the regulatory

authorities. Compliance with these standards by the banks/financial institutions/NBFCs in the

country have become necessary for international financial relationships. The Department of

Banking Operations and Development of Reserve Bank had issued detailed guidelines to the banks

based on the Recommendations of the Financial Action Task Force and the paper issued on

Customer Due Diligence (CDD) for banks by the Basel Committee on Banking Supervision, with

indicative suggestions wherever considered necessary. These guidelines are equally applicable to

NBFCs. All NBFCs were, therefore, advised to adopt the same with suitable modifications

depending on the activity undertaken by them and ensure that a proper policy framework on ‘Know

Your Customer’ and Anti-Money Laundering measures is formulated and put in place with the

approval of the Board.

2. General Guidelines

The information collected from the customer for the purpose of opening of account should be kept

as confidential and any details thereof should not be divulged for cross selling or any other

purposes. Value Fin India Credit Services Private Limited (here in after referred to as

VALUEFIN ) should ensure that information sought from the customer is relevant to the perceived

risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other

information from the customer should be sought separately with his /her consent and after opening

the account.

3. Definitions

3.1 Customer

For the purpose of KYC Norms, a ‘Customer’ is defined as a person who is engaged in a financial

transaction or activity with and includes a person on whose behalf the person who is engaged in

the transaction or activity, is acting.

3.2 Designated Director

“Designated Director" means a person designated by VALUEFIN INDIA to ensure overall


compliance with the obligations imposed under chapter IV of the PML Act and the Rules. In case

of VALUEFIN INDIA, the Designated Director is Mr. Manoj Kumar Rawat (Managing Director

& CEO). The Principal Officer should not be nominated as the "Designated Director".

3.3 Officially valid document (OVD)

“Officially Valid Document” (OVD) means the passport, the driving license,

the Voter's Identity Card issued by the Election Commission of India, job card issued by NREGA

duly signed by an officer of the State Government, letter issued by the National Population

Register containing details of name and address.

Explanation 1.-For the purpose of this clause, a document shall be deemed to be an OVD even if

there is a change in the name subsequent to its issuance provided it is supported by a marriage

certificate issued by the State Government or Gazette notification, indicating such a change of

name.

3.4 Person

In terms of PML Act a ‘person’ includes:

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) every artificial juridical person, not falling within any one of the above persons (i to v), and

(vii) any agency, office or branch owned or controlled by any of the above persons (i to vi).

3.5 Transaction

“Transaction” means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes-

i. opening of an account;

ii. deposits, withdrawal, exchange or transfer of funds in whatever currency, whether in cash

or by cheque, payment order or other instruments or by electronic or other non-physical

means;

iii. the use of a safety deposit box or any other form of safe deposit;

iv. entering into any fiduciary relationship;

v. any payment made or received in whole or in part of any contractual or other legal


obligation; or

vi. establishing or creating a legal person or legal arrangement.

4. The guidelines are equally applicable to the persons authorised by VALUEFIN INDIA

including brokers/agents etc.

5. VALUEFIN INDIA is required to put in place a system of periodical review of risk categorisation

of accounts and the need for applying enhanced due diligence measures in case of higher risk

perception on a customer. Such review of risk categorisation of customers should be carried out at

a periodicity of not less than once in six months. VALUEFIN INDIA should introduce a system of

periodical updation of customer identification data (including photograph/s) after the account is

opened. Accordingly, VALUEFIN INDIA is required to undertake 'Client Due Diligence' and apply

such measures to existing clients based on risk categorization.

a) VALUEFIN INDIA would need to continue to carry out on-going due diligence with respect to

the business relationship with every client and closely examine the transactions in order to ensure

that they are consistent with their knowledge of the client, his business and risk profile and,

wherever necessary, the source of funds.

b) Full KYC exercise will be required to be done at least every two years for high risk individuals

and entities.

c) Full KYC exercise will be required to be done at least every ten years for low risk and at least

every eight years for medium risk individuals and entities taking in to account whether and when

client due diligence measures have previously been undertaken and the adequacy of data obtained.

Physical presence of the clients may, however, not be insisted upon at the time of such periodic

updations.

d) Fresh photographs will be required to be obtained from minor customer on becoming major.

6. KYC/AML guidelines issued by the RBI shall also apply to VALUEFIN INDIA branches and

majority owned subsidiaries located outside India, especially, in countries which do not or

insufficiently apply the FATF Recommendations, to the extent local laws permit. In case, there is

a variance in KYC/AML standards prescribed by the Reserve Bank and the host country regulators,

branches/overseas subsidiaries of VALUEFIN INDIA are required to adopt the more stringent

regulation of the two.

7. Allocation of Unique Customer Identification Code

In the context of recommendations of Working Group constituted by the Government of India

regarding the introduction of unique identifiers for customers across different Financial Institutions

for setting up a centralized KYC Registry, non-deposit taking NBFCs with asset size of Rs. 25

crore and above and all Deposit taking NBFCs have been advised to allot UCIC while entering

into new relationships with individual customers as also the existing customers. A Unique

Customer Identification Code (UCIC) will help NBFCs to identify the customers, avoid multiple

identities, track the facilities availed, monitor financial transactions in a holistic manner and enable


NBFCs to have a better approach to risk profiling of customers. VALUEFIN INDIA shall allot a

Unique Customer Identification Code to every customer.

8. Accounts of Politically Exposed Persons (PEPs)

Politically Exposed Persons are individuals who are or have been entrusted with prominent public

functions in a foreign country, e.g., Heads of States/Governments, senior politicians, senior

government/judicial/military officers, senior executives of state-owned corporations, important

political party officials, etc. VALUEFIN INDIA should gather sufficient information on any

person/customer of this category intending to establish a relationship and check all the information

available on such person in the public domain. VALUEFIN INDIA should verify the identity of

the person and seek information about the sources of funds before accepting the PEP as a customer.

The decision to open an account for a PEP should be taken at a senior level which should be clearly

spelt out in the VALUEFIN INDIA Customer Acceptance Policy. Banks should also subject such

accounts to enhanced monitoring on an on-going basis. The above norms should also be applied

to the accounts of the family members or close relatives of PEPs.

In the event of an existing customer or the beneficial owner of an existing account, subsequently

becoming a PEP, VALUEFIN INDIA should obtain senior management approval to continue the

business relationship and subject the account to the CDD measures as applicable to the customers

of PEP category including enhanced monitoring on an ongoing basis.

The instructions are also applicable to accounts where PEP is the ultimate beneficial owner.

Further, in regard to PEP accounts, VALUEFIN INDIA should have appropriate ongoing risk

management procedures for identifying and applying enhanced CDD to PEPs, customers who are

close relatives of PEPs, and accounts of which PEP is the ultimate beneficial owner.

9. Client accounts opened by professional intermediaries

When VALUEFIN INDIA has knowledge or reason to believe that the client account opened by a

professional intermediary is on behalf of a single client, that client must be identified. VALUEFIN

INDIA may hold 'pooled' accounts managed by professional intermediaries on behalf of entities

like mutual funds, pension funds or other types of funds. VALUEFIN INDIA also maintain

'pooled' accounts managed by lawyers/chartered accountants or stockbrokers for funds held 'on

deposit' or 'in escrow' for a range of clients. Where funds held by the intermediaries are not co-

mingled at VALUEFIN INDIA and there are 'sub-accounts', each of them attributable to a

beneficial owner, all the beneficial owners must be identified. Where such funds are co-mingled

at VALUEFIN INDIA, VALUEFIN INDIA should still look through to the beneficial owners.

If VALUEFIN INDIA decides to accept an account in terms of the Customer Acceptance Policy,

VALUEFIN INDIA should take reasonable measures to identify the beneficial owner(s) and verify

his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s)

is/are. Therefore, under the extant AML/CFT framework, it is not possible for professional

intermediaries like Lawyers and Chartered Accountants, etc. who are bound by any client

confidentiality that prohibits disclosure of the client details, to hold an account on behalf of their

clients.


Therefore, VALUEFIN INDIA should not allow opening and/or holding of an account on behalf

of a client/s by professional intermediaries, like Lawyers and Chartered Accountants, etc., who are

unable to disclose true identity of the owner of the account/funds due to any professional obligation

of customer confidentiality. Further, any professional intermediary who is under any obligation

that inhibits VALUEFIN INDIA ability to know and verify the true identity of the client on whose

behalf the account is held or beneficial ownership of the account or understand true nature and

purpose of transaction/s, should not be allowed to open an account on behalf of a client.

10. Accounts of proprietary concerns

VALUEFIN INDIA should take reasonable measures to identify the beneficial owner(s) and verify

his / her / their identity in a manner so that it is satisfied that it knows who the beneficial owner(s)

is /are.

Accordingly, apart from following the extant guidelines on customer identification procedure as

applicable to the proprietor, VALUEFIN INDIA should call for and verify the following

documents before opening of accounts in the name of a proprietary concern:

i) Proof of the name, address and activity of the concern, like registration certificate (in the case

of a registered concern), certificate/licence issued by the Municipal authorities under Shop &

Establishment Act, sales and income tax returns, CST / VAT/GST certificate, certificate /

registration document issued by Sales Tax / Service Tax / Professional Tax authorities, license

issued by the Registering authority like Certificate of Practice issued by Institute of Chartered

Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of

India, Indian Medical Council, Food and Drug Control Authorities, etc.

ii) Any registration / licensing document issued in the name of the proprietary concern by the

Central Government or State Government Authority/ Department. VALUEFIN INDIA may also

accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as

an identity document for opening of account.

iii) The complete Income Tax return (not just the acknowledgement) in the name of the sole

proprietor where the firm's income is reflected, duly authenticated/acknowledged by the Income

Tax Authorities.

iv) Utility bills such as electricity, water, and landline telephone bills in the name of the

proprietary concern.

v) Any two of the above documents would suffice. These documents should be in the name of the

proprietary concern.

11. Beneficial ownership

When VALUEFIN INDIA identifies a customer for opening an account, it should identify the


beneficial owner(s) and take all reasonable steps in terms of Rule 9(3) of the PML Rules to verify

his identity, as per guidelines provided below:

(a) Where the client is a company, the beneficial owner is the natural person(s), who, whether

acting alone or together, or through one or more juridical person, has/have a controlling ownership

interest or who exercises control through other means.

Explanation- For the purpose of this sub-clause-

1. “Controlling ownership interest” means ownership of/entitlement to more than 25 per cent

of the shares or capital or profits of the company.

2. “Control” shall include the right to appoint majority of the directors or to control the

management or policy decisions including by virtue of their shareholding or management

rights or shareholders agreements or voting agreements.

(b) Where the client is a partnership firm, the beneficial owner is the natural person(s), who,

whether acting alone or together, or through one or more juridical person, has/have ownership

of/entitlement to more than 15 per cent of capital or profits of the partnership.

(c) Where the client is an unincorporated association or body of individuals, the beneficial owner

is the natural person(s), who, whether acting alone or together, or through one or more juridical

person, has/have ownership of/entitlement to more than 15 per cent of the property or capital or

profits of the unincorporated association or body of individuals.

(d) Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the

relevant natural person who holds the position of senior managing official.

(e) Where the client is a trust, the identification of beneficial owner(s) shall include identification

of the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and

any other natural person exercising ultimate effective control over the trust through a chain of

control or ownership.

Where the client or the owner of the controlling interest is a company listed on a stock exchange,

or is a subsidiary of such a company, it is not necessary to identify and verify the identity of any

shareholder or beneficial owner of such companies.

12. Principal Officer

VALUEFIN INDIA should appoint a senior management officer to be designated as Principal

Officer and the role and responsibilities of the Principal Officer have been detailed therein. With

a view to enable the Principal Officer to discharge his responsibilities, the Principal Officer and

other appropriate staff should have timely access to customer identification data and other CDD

information, transaction records and other relevant information. Further, VALUEFIN INDIA

should ensure that the Principal Officer is able to act independently and report directly to the senior

management or to the Board of Directors. The role and responsibilities of the Principal Officer

should include overseeing and ensuring overall compliance with regulatory guidelines on


KYC/AML/CFT issued from time to time and obligations under the Prevention of Money

Laundering Act, 2002, rules and regulations made thereunder, as amended from time to time.

13. Suspicion of money laundering/terrorist financing

With a view to preventing VALUEFIN INDIA from being used, intentionally or unintentionally,

by criminal elements for money laundering or terrorist financing, whenever there is suspicion of

money laundering or terrorist financing or when other factors give rise to a belief that the customer

does not, in fact, pose a low risk, VALUEFIN INDIA shall carry out full scale customer due

diligence (CDD) before opening an account.

14. Filing of Suspicious Transaction Report (STR)

VALUEFIN INDIA should not open an account (or should consider closing an existing account)

when it is unable to apply appropriate CDD measures. In the circumstances, if VALUEFIN INDIA

believes that it would no longer be satisfied that it knows the true identity of the account holder,

the Company should also file an STR with FIU-IND.

Prevention of Money Laundering Act, 2002 - Obligations of NBFCs in terms of Rules notified

thereunder

1. VALUEFIN INDIA to appoint a Principal Officer and put in place a system of internal reporting

of suspicious transactions and cash transactions of Rs.10 lakh and above. In this connection,

Government of India, Ministry of Finance, Department of Revenue, issued a notification dated

July 1, 2005 in the Gazette of India, notifying the Rules under the Prevention of Money Laundering

Act (PMLA), 2002. In terms of the Rules, the provisions of PMLA, 2002 came into effect from

July 1, 2005. Section 12 of the PMLA, 2002 casts certain obligations on the VALUEFIN INDIA

in regard to preservation and reporting of customer account information.

With the enactment of Prevention of Money Laundering (Amendment) Act, 2012 and amendment

to Section 13 of the Act which provides for “Powers of Director to impose fine”, the section 13(2)

now reads as under:

“If the Director, in the course of any inquiry, finds that a reporting entity or its designated director

on the Board or any of its employees has failed to comply with the obligations under this Chapter,

then, without prejudice to any other action that may be taken under any other provisions of this

Act, he may—

(a) issue a warning in writing; or

(b) direct such reporting entity or its designated director on the Board or any of its employees, to

comply with specific instructions; or

(c) direct such reporting entity or its designated director on the Board or any of its employees, to

The Principal Officer for VALUEFIN INDIA is Mr. Manoj Thakur.


send reports at such interval as may be prescribed on the measures it is taking; or

(d) by an order, levy a fine on such reporting entity or its designated director on the Board or any

of its employees, which shall not be less than ten thousand rupees but may extend to one lakh

rupees for each failure.”

2. Maintenance of records of transactions

2.1 VALUEFIN INDIA should introduce a system of maintaining proper record of transactions

prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules,

2005 (PML Rules, 2005), as mentioned below:

(i) all cash transactions of the value of more than rupees ten lakh or its equivalent in foreign

currency;

(ii) Series of all cash transactions individually valued below Rupees Ten Lakh, or its equivalent in

foreign currency which have taken place within a month and the monthly aggregate which exceeds

rupees ten lakhs or its equivalent in foreign currency. It is clarified that for determining ‘integrally

connected transactions’ ‘all accounts of the same customer’ should be taken into account.

(iii) all cash transactions where forged or counterfeit currency notes or bank notes have been used

as genuine and where any forgery of a valuable security has taken place facilitating the

transactions;

(iv) all suspicious transactions whether or not made in cash and in manner as mentioned in the

Rules framed by Government of India under the Prevention of Money Laundering Act, 2002.

VALUEFIN INDIA is required to adhere to the reporting requirements as per the amended rules.

2.2 VALUEFIN INDIA is required to maintain all necessary information in respect of transactions

prescribed under PML Rule 3 so as to permit reconstruction of individual transaction, including

the following information:

i. the nature of the transactions;

ii. the amount of the transaction and the currency in which it was denominated;

iii. the date on which the transaction was conducted; and

iv. the parties to the transaction.

3. Preservation of records

VALUEFIN INDIA should take appropriate steps to evolve a system for proper maintenance and

preservation of account information in a manner that allows data to be retrieved easily and quickly

whenever required or when requested by the competent authorities.

(i) In terms of PML Amendment Act 2012, VALUEFIN INDIA should maintain for at least five


years from the date of transaction between the VALUEFIN INDIA and the client, all necessary

records of transactions, both domestic or international, which will permit reconstruction of

individual transactions (including the amounts and types of currency involved, if any) so as to

provide, if necessary, evidence for prosecution of persons involved in criminal activity.

(ii) VALUEFIN INDIA should ensure that records pertaining to the identification of the customers

and their address (e.g. copies of documents like passports, identity cards, driving licenses, PAN

card, utility bills, etc.) obtained while opening the account and during the course of business

relationship, are properly preserved for at least five years after the business relationship is ended

as required under Rule 10 of the Rules ibid. The identification of records and transaction data

should be made available to the competent authorities upon request.

(iii) VALUEFIN INDIA may maintain records of the identity of their clients, and records in

respect of transactions referred to in Rule 3 in hard or soft format.

(iv) VALUEFIN INDIA is required to pay special attention to all complex, unusual large

transactions and all unusual patterns of transactions, which have no apparent economic or visible

lawful purpose. It is further clarified that the background including all documents/office

records/memorandums pertaining to such transactions and purpose thereof should, as far as

possible, be examined and the findings at branch as well as Principal Officer level should be

properly recorded. Such records and related documents should be made available to help auditors

to scrutinize the transactions and also to Reserve Bank/other relevant authorities. These records

are required to be preserved for five years as is required under PMLA, 2002.

4. Reliance on third party due diligence

For the purpose of verifying the identity of customers at the time of commencement of an

account-based relationship, VALUEFIN INDIA may rely on a third party subject to the

conditions that-

1. VALUEFIN INDIA immediately obtains necessary information of such client due

diligence carried out by the third party;

2. VALUEFIN INDIA takes adequate steps to satisfy itself that copies of identification data

and other relevant documentation relating to the client due diligence requirements will be

made available from the third party upon request without delay;

3. VALUEFIN INDIA is satisfied that such third party is regulated, supervised or monitored

for, and has measures in place for compliance with client due diligence and record-keeping

requirements in line with the requirements and obligations under the PML Act;

4. the third party is not based in a country or jurisdiction assessed as high risk and

5. VALUEFIN INDIA is ultimately responsible for client due diligence and undertaking

enhanced due diligence measures, as applicable

5. Reporting to Financial Intelligence Unit-India

5.1 In terms of the PMLA rules, NBFCs are required to report information relating to cash and

suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND) at the


following address:

Director, FIU-IND,

Financial Intelligence Unit-India,

6th Floor, Hotel Samrat,

Chanakyapuri,

New Delhi-110021

(i) There are altogether five reporting formats prescribed for VALUEFIN INDIA viz. i) Manual

reporting of cash transactions ii) Manual reporting of suspicious transactions iii) Consolidated

reporting of cash transactions by Principal Officer of the VALUEFIN INDIA iv) Electronic data

structure for cash transaction reporting and v) Electronic data structure for suspicious transaction

reporting which are enclosed to this circular. The reporting formats contain detailed guidelines on

the compilation and manner/procedure of submission of the reports to FIU-IND. VALUEFIN

INDIA should initiate urgent steps to ensure electronic filing of cash transaction report (CTR) as

early as possible. The related hardware and technical requirement for preparing reports in an

electronic format, the related data files and data structures thereof were furnished in the

instructions part of the concerned formats. While detailed instructions for filing all types of reports

are given in the instructions part of the related formats, VALUEFIN INDIA should scrupulously

adhere to the following:

(a) The cash transaction report (CTR) for each month should be submitted to FIU-IND by 15th of

the succeeding month. While filing CTR, individual transactions below rupees fifty thousand may

not be included. Cash transaction reporting by branches/offices of VALUEFIN INDIA to their

Principal Officer should invariably be submitted on monthly basis (not on fortnightly basis) and

the Principal Officer, in turn, should ensure to submit CTR for every month to FIU-IND within

the prescribed time schedule;

(b) The Suspicious Transaction Report (STR) should be furnished within 7 days of arriving at a

conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally

connected are of suspicious nature. The Principal Officer should record his reasons for treating

any transaction or a series of transactions as suspicious. It should be ensured that there is no undue

delay in arriving at such a conclusion once a suspicious transaction report is received from a branch

or any other office. Such report should be made available to the competent authorities on request;

(c) The Principal Officer will be responsible for timely submission of CTR and STR to FIU- IND;

(d) Utmost confidentiality should be maintained in filing of CTR and STR with FIU-IND. The

reports may be transmitted by speed/ registered post, fax, email at the notified address;

(e) It should be ensured that the reports for all the branches are filed in one mode i.e. electronic or

manual;

(f) A summary of cash transaction report for the VALUEFIN INDIA as a whole may be compiled

by the Principal Officer of the VALUEFIN INDIA in physical form as per the format specified.


The summary should be signed by the Principal Officer and submitted both for manual and

electronic reporting.

5.2. VALUEFIN INDIA to initiate steps to ensure electronic filing of cash transaction report

(CTR) and Suspicious Transaction Reports (STR) to FIU-IND. In case where all the branches are

not yet fully computerized, the Principal Officer should cull out the transaction details from

branches which are not computerized and suitably arrange to feed the data into an electronic file

with the help of the editable electronic utilities of CTR/STR as have been made available by FIU-

IND on their website http://fiuindia.gov.in.

5.3. VALUEFIN INDIA may not put any restrictions on operations in the accounts where an STR

has been made. However, it should be ensured that there is no tipping off to the customer at any

level. It is likely that in some cases, transactions are abandoned/ aborted by customers on being

asked to give some details or to provide documents. VALUEFIN INDIA should report all such

attempted transactions in STRs, even if not completed by customers, irrespective of the amount of

the transaction.

5.4. In regard to CTR, the cut-off limit of Rupees ten lakh is applicable to integrally connected

cash transactions also. Further, after consultation with FIU-IND, it is clarified that:

a) For determining integrally connected cash transactions, VALUEFIN INDIA should take into

account all individual cash transactions in an account during a calendar month, where either debit

or credit summation, computed separately, exceeds Rupees ten lakh during the month. However,

while filing CTR, details of individual cash transactions below rupees fifty thousand may not be

indicated. Illustration of integrally connected cash transactions is furnished as below.

Illustration of Integrally connected cash transaction

The following transactions have taken place in an NBFC during the month of April, 2008:

Date Mode Dr.

(in Rs.)

Cr.

(in Rs.)

Balance (in Rs.)

BF - 8,00,000.00

http://fiuindia.gov.in/


02/04/2008 Cash 5,00,000.00 3,00,000.00 6,00,000.00

07/04/2008 Cash 40,000.00 2,00,000.00 7,60,000.00

08/04/2008 Cash 4,70,000 1,00,000.00 3,90,000.00

Monthly summation 10,10,000.00 6,00,000.00

i) As per above clarification, the debit transactions in the above example are integrally connected

cash transactions because total cash debits during the calendar month exceeds Rs.10 lakhs.

However, the NBFC should report only the debit transaction taken place on 02/04 & 08/04/2008.

The debit transaction dated 07/04/2008 should not be separately reported by the NBFC, which is

less than Rs.50, 000/-.

ii) All the credit transactions in the above example would not be treated as integrally connected,

as the sum total of the credit transactions during the month does not exceed Rs.10 lakh and hence

credit transaction dated 02, 07 & 08/04/2008 should not be reported by NBFC.

b) CTR should contain only the transactions carried out by the VALUEFIN INDIA on behalf of

their clients/customers excluding transactions between the internal accounts of the VALUEFIN

INDIA.

c) All cash transactions, where forged or counterfeit Indian currency notes have been used as

genuine should be reported by the Principal Officer to FIU-IND immediately in the format

(Counterfeit Currency Report – CCR). Electronic data structure has been furnished to enable

NBFCs to generate electronic CCRs. These cash transactions should also include transactions

where forgery of valuable security or documents has taken place and may be reported to FIU- IND

in plain text form.

The multiple data files reporting format were replaced by a new single XML file format as

provided in the ‘Download’ section of the FIU-IND website (http://fiuindia.gov.in/). All NBFCs

were requested to carefully go through the revised reporting format and initiate urgent steps to

build capacity to generate reports, which are compliant with the new reporting XML format

specifications.

FIU-IND had advised vide their letter F.No.9-29/2011-FIU-IND dated August 28, 2012, that all

NBFCs should initiate submission of reports on the FINnet Gateway in ‘TEST MODE’ from

August 31, 2012 to test their ability to upload the report electronically. Such submission in ‘Test

Mode’ was to be continued till FIU-IND informs the NBFCs about ‘go-live’ of the project.

As the project has gone 'live' NBFCs were advised to discontinue submission of reports in CD,

using only FINnet gateway for uploading of reports in the new XML reporting format. Any report

in CD will not be treated as a valid submission by FIU-IND. For any clarification / assistance

regarding submission of reports, NBFCs may contact FIU-IND help desk at email or telephone

numbers 011-24109792/93.

5.5 While making STRs, NBFCs should be guided by the definition of 'suspicious transaction' as

http://fiuindia.gov.in/


contained in Rule 2(g) of Rules ibid. NBFCs should make STRs if they have reasonable ground to

believe that the transaction involve proceeds of crime generally irrespective of the amount of

transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of

PMLA, 2002.

5.6 In terms of Rule 8, while furnishing information to the Director, FIU-IND, delay of each day

in not reporting a transaction or delay of each day in rectifying a mis-represented transaction

beyond the time limit as specified in the Rule shall constitute a separate violation.

6. VALUEFIN INDIA is required to prepare a profile for each customer based on risk

categorization. VALUEFIN INDIA as a part of transaction monitoring mechanism, were required

to put in place an appropriate software application to throw alerts when the transactions are

inconsistent with risk categorization and updated profile of customers. It is needless to add that a

robust software throwing alerts is essential for effective identification and reporting of suspicious

transactions.

7. VALUEFIN INDIA is required to pay special attention to all complex, unusual large

transactions and all unusual patterns of transactions, which have no apparent economic or visible

lawful purpose. The background including all documents/office records/memorandums pertaining

to such transactions and purpose thereof should, as far as possible, be examined and the findings

at branch as well as Principal Officer level should be properly recorded. These records are required

to be preserved for ten years as is required under PMLA, 2002. Such records and related

documents should be made available to help auditors in their work relating to scrutiny of

transactions and also to Reserve Bank/other relevant authorities.

8. Prevention of Money-laundering (Maintenance of Records of the Nature and Value of

Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and

Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies,

Financial Institutions and Intermediaries) Amendment Rules, 2009/10 - Obligation of

banks/Financial institutions

9. Assessment and Monitoring of Risk

VALUEFIN INDIA should have policies, controls and procedures, duly approved by their boards,

in place to effectively manage and mitigate their risk, adopting a risk-based approach. As a

corollary, VALUEFIN INDIA would be required to adopt enhanced measures for products,

services and customers with a medium or high risk rating.

VALUEFIN INDIA should place to put in place a system of periodic review of risk categorization

of customers and updation of customer identification data in a time-bound manner.

III. Combating financing of terrorism

In terms of PMLA Rules, suspicious transaction should include inter alia transactions which give

rise to a reasonable ground of suspicion that these may involve financing of the activities relating


to terrorism. VALUEFIN INDIA to develop suitable mechanism through appropriate policy

framework for enhanced monitoring of accounts suspected of having terrorist links and swift

identification of the transactions and making suitable reports to the Financial Intelligence Unit –

India (FIU-IND) on priority.

1. VALUEFIN INDIA should ensure to update the consolidated list of individuals and entities as

circulated by Reserve Bank. Further, the updated list of such individuals/entities can be accessed

in the United Nations website. VALUEFIN INDIA should ensure that before opening any new

account, the name/s of the proposed customer does not appear in the list. Further, NBFCs should

scan all existing accounts to ensure that no account is held by or linked to any of the entities or

individuals included in the list. Full details of accounts bearing resemblance with any of the

individuals/entities in the list should immediately be intimated to RBI and FIU-IND.

2. Adequate screening mechanism is put in place by VALUEFIN INDIA as an integral part of their

recruitment/hiring process of personnel.

3. In the context of creating KYC/AML awareness among the staff and for generating alerts for

suspicious transactions, VALUEFIN INDIA may consider an indicative list of suspicious

activities.

4. Countries which do not or insufficiently apply the FATF recommendations

Financial Action Task Force (FATF) has issued several Statements on risks arising from the

deficiencies in AML/CFT regime of various countries for example Uzbekistan, Iran, Pakistan,

Turkmenistan, Sao Tome and Principe on etc. which are updated from time to time. All

NBFCs/RNBCs were required to consider the information contained in the statements issued by

FATF which however, does not preclude financial institutions from legitimate trade and business

transactions with the countries and jurisdictions mentioned in the statement.

NBFCs should take into account risks arising from the deficiencies in AML/CFT regime of the

jurisdictions included in the FATF Statement. NBFCs should, in addition to FATF Statements

circulated by Reserve Bank from time to time, also consider publicly available information for

identifying such countries, which do not or insufficiently apply the FATF Recommendations.

NBFCs should give special attention to business relationships and transactions with persons

(including legal persons and other financial institutions) from or in these countries.

5. Monitoring

Ongoing monitoring is an essential element of effective KYC procedures. VALUEFIN INDIA

should examine the background and purpose of transactions with persons (including legal persons

and other financial institutions) from jurisdictions included in FATF Statements and countries that

do not or insufficiently apply the FATF Recommendations. Further, if the transactions have no

apparent economic or visible lawful purpose, the background and purpose of such transactions

should, as far as possible be examined, and written findings together with all documents be retained

and made available to Reserve Bank/other relevant authorities, on request.


VALUEFIN INDIA should apply enhanced due diligence measures on high risk customers. Some

illustrative examples of customers requiring higher due diligence are given in the paragraph under

reference. In view of the risks involved in cash intensive businesses, accounts of bullion dealers

(including sub-dealers) and jewelers should also be categorized by VALUEFIN INDIA as ‘high

risk’ requiring enhanced due diligence.

Ongoing monitoring is an essential element of effective KYC procedures. VALUEFIN INDIA is

also required to subject these ‘high risk accounts’ to intensified transaction monitoring. High risk

associated with such accounts should be taken into account by VALUEFIN INDIA to identify

suspicious transactions for filing Suspicious Transaction Reports (STRs) to FIU-ND.

V. Inter-Governmental Agreement (IGA) with United States of America (US) under Foreign

Accounts Tax Compliance Act (FATCA) - Registration

Government of India has now advised that to avoid withholding tax, Foreign Financial Institutions

(FFIs) in Model 1 jurisdictions, such as India, need to register with IRS and obtain a Global

Intermediary Identification Number (GIIN) before January 1, 2015. The FFIs who have registered

but have not obtained a GIIN should indicate to the withholding agents that the GIIN is applied

for, which may be verified by the withholding agents in 90 days. In this regard, the FAQ published

on the IRS website (updated as on December 22, 2014), as received from the Government of India,

is furnished in the circular DNBR.CC.PD.No.010/03.10.01/2014-15, dated January 9, 2015.

Accordingly, VALUEFIN INDIA may take action appropriately.

VI. Constitution of Special Investigating Team – sharing of information

VALUEFIN INDIA should ensure that the information/documents required by the SIT are made

available as and when required.

15. As per the RBI AML Circular dated 1st July 2015 (DNBR (PD) CC No. 051/03.10.119/2015-

16) all NBFCs are advised that before opening any new account, it should be ensured that the

name/s of the proposed customer does not appear in the list. PFB the link used to download the

file for regular update.

https://www.un.org/sc/suborg/en/sanctions/un-sc-consolidated-list

16. The customer should past the below link as part of the initial checks at the pre-

sanction/application stage itself so that no transactions are done with these persons/entities. This

is the United States Specially Designated Nationals and Blocked Persons List (OFAC list). The

link is given below to check for regular updates.

https://www.treasury.gov/resource-center/sanctions/SDN-List/pages/default.aspx

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9468&Mode=0

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9468&Mode=0

https://www.un.org/sc/suborg/en/sanctions/un-sc-consolidated-list

https://www.treasury.gov/resource-center/sanctions/SDN-List/pages/default.aspx


Customer Identification Procedure

1. For Individuals

(i) Passport*

(ii) PAN card

(iii) Voter’s Identity Card issued by Election Commission*

(iv) Driving License*

(v) Job Card issued by NREGA duly signed by an officer of the State Govt

(vi) The letter issued by the Unique Identification Authority of India ( UIDAI) containing

details of name, address and Aadhaar number.*

Documents marked as * can be used as both ID and Address proof. All documents should be

valid and not expired as on the date of acceptance.

2. For Companies

(a) Certificate of incorporation;

(b) Memorandum and Articles of Association;

(c) A resolution from the Board of Directors and power of attorney granted to its

managers, officers or employees to transact on its behalf; and

(d) An officially valid document in respect of managers, officers or employees

holding an attorney to transact on its behalf.

3. For Partnership Firms

(a) Registration certificate;

(b) Partnership deed; and

(c) An officially valid document in respect of the person holding an attorney to transact

on its behalf.

4. For Trusts and Foundations

(a) Registration certificate;

(b) Trust deed; and

(c) An officially valid document in respect of the person holding a power of attorney to

transact on its behalf.


5. For Proprietorship Concerns

Apart from Customer identification procedure as applicable to the proprietor ( take ID and

Address proof as applicable for individuals) additionally, take any two of the following

documents in the name of the proprietary concern.

Registration certificate (in the case of a registered concern)

Certificate/licence issued by the Municipal authorities under Shop & Establishment Act, Sales and income tax returns

CST/VAT certificate

Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax

authorities

Licence/certificate of practice issued in the name of the proprietary concern by any

professional body incorporated under a statute. The complete Income Tax return (not just

the acknowledgement) in the name of the sole proprietor where the firm's income is

reflected, duly authenticated/ acknowledged by the Income Tax Authorities.


Operational Procedure to be followed by NBFCs for e-KYC exercise

The e-KYC service of the UIDAI is be leveraged by NBFCs through a secured network. Any

NBFC willing to use the UIDAI e-KYC service is required to sign an agreement with the UIDAI.

The process flow to be followed is as follows:

1. Sign KYC User Agency (KUA) agreement with UIDAI to enable the NBFC to specifically

access e-KYC service.

2. NBFCs to deploy hardware and software for deployment of e-KYC service across various

delivery channels. These should be Standardisation Testing and Quality Certification (STQC)

Institute, Department of Electronics & Information Technology, Government of India certified

biometric scanners at NBFC branches as per UIDAI standards. The current list of certified

biometric scanners is given in the link below

:http://www.stqc.gov.in/sites/upload_files/stqc/files/UID_Auth_Certlist_250613.pdf

3. Develop a software application to enable use of e-KYC across various NBFC branches, as per

UIDAI defined Application Programming Interface (API) protocols. For this purpose, NBFCs

will have to develop their own software under the broad guidelines of UIDAI. Therefore, the

software may differ from NBFC to NBFC.

4. Define a procedure for obtaining customer authorization to UIDAI for sharing e-KYC data

with the NBFC. This authorization can be in physical (by way of a written explicit consent

authorising UIDAI to share his / her Aadhaar data with the NBFC for the purpose of opening

deposit account) / electronic form as defined by UIDAI from time to time.

5. Sample process flow would be as follows:

a. Customer walks into branch of NBFC with his / her 12-digit Aadhaar number and explicit

consent and requests to open a deposit account with Aadhaar based e-KYC.

b. NBFC representative manning the branch enters the number into NBFC's e-KYC application

software.

c. The customer inputs his / her biometrics via a UIDAI compliant biometric reader (e.g.

fingerprints on a biometric reader).

d. The software application captures the Aadhaar number along with biometric data, encrypts

this data and sends it to UIDAI's Central Identities Data Repository (CIDR).

e. The Aadhaar KYC service authenticates customer data. If the Aadhaar number does not match

with the biometrics, UIDAI server responds with an error with various reason codes depending

on type of error (as defined by UIDAI).

http://www.stqc.gov.in/sites/upload_files/stqc/files/UID_Auth_Certlist_250613.pdf


f. If the Aadhaar number matches with the biometrics, UIDAI responds with digitally signed and

encrypted demographic information [Name, year / date of birth, Gender, Address, Phone and

email (if available)] and photograph. This information is captured by NBFC’s e-KYC application

and processed as needed.

g. NBFC’s servers auto populate the demographic data and photograph in relevant fields. It also

records the full audit trail of e-KYC viz. source of information, digital signatures, reference

number, original request generation number, machine ID for device used to generate the request,

date and time stamp with full trail of message routing, UIDAI encryption date and time stamp,

NBFCs decryption date and time stamp, etc.

h. The photograph and demographics of the customer can be seen on the screen of computer at

NBFC branches for reference.

i. The customer can open deposit account subject to satisfying other account opening

requirements.

These guidelines will be modified & updated depending on the directions issued from

time to time.


Indicative list of High/Medium Risk Customers

Characteristics of High Risk Customers

1. Individuals and entities listed in various United Nations Security Council Resolutions

(UNSCRs) such as UN 1267 etc.

2. Individuals or entities listed in the schedule to the order under section 51A of the Unlawful

Activities (Prevention) Act, 1967 relating to the purposes of prevention of, and for coping with

terrorist activities.

3. Individuals or entities in watch lists issued by Interpol and other similar international

organizations.

4. Customers with dubious reputation as per public information available or commercially

available watch lists.

5. Individuals and entities specifically identified by regulators, FIU and other competent

authorities as high risk.

6. Customers conducting their business relationship or transactions in unusual circumstances

such as significant and unexplained geographic distance between the institution and the

location of the customer, frequent and unexplained movement of accounts to different

institutions, frequent and unexplained movement of funds between institutions in various

geographic locations etc.

7. Customers based in high risk countries / jurisdictions or locations

8. Politically exposed persons (PEPs) of foreign origin, customers who are close relatives of

PEPs and accounts of which a PEP is the ultimate beneficial owner.

9. Non-resident customers and foreign nationals.

10. Embassies/consulates

11. Off-shore (foreign) corporation/business

12. Non face-to-face customers

13. High net worth individuals

14. Firms with “Sleeping partners”

15. Companies having close family shareholding or beneficial ownership


16. Complex business ownership structures, which can make it easier to conceal underlying

beneficiaries, where there is no legitimate commercial rationale.

17. Shell companies which have no physical presence in the country in which it is incorporated.

The existence simply of a local agent or low level staff does not constitute physical presence.

18. Investment Management/ Money Management Company/ Personal Investment Company

19. Accounts for “gatekeepers” such as accountants, lawyers or other professionals for their

clients where the identity of the underlying client is not disclosed to the financial institution.

20. Client Accounts managed by professional service providers such as law firms, accountants,

agents, brokers, fund managers, trustees, custodians etc.

21. Trusts, charities, NGOs/Non- Profit Organisations (NPOs) (Especially those operating on a

“cross-border” basis) unregulated clubs and organizations receiving donations (excluding

NPOs/NGOs promoted by United Nations or its agencies)

22. Money Service Business: including seller of : Money Orders/ Travelers’ Checks/ Money

Transmission/ Chek Cashing/ Currency Dealing or Exchange

23. Business accepting third party cheques (except Super markets or retail stores that accep

payroll cheques/ cash payroll cheques)

24. Gambling/ Gaming including “Junket Operators” arranging gambling tours.

25. Dealers in high value or precious goods (e.g. Jewel, gem and precious metals dealers, art

and antique dealers and auction houses, estate agents and real estate brokers)

26. Customers engaged in business which is associated with higher levels of corruption (e.g.

arms manufacturers, dealers and intermediaries.)

27. Customers engaged in industries that might relate to nuclear proliferation activities or

explosives.

28. Customers that may appear to be Multi level marketing companies etc.

Characteristics of Medium Risk Customers

1. Non-Bank Financial Institution

2. Stock brokerage

3. Import/Export

4. Gas Station

5. Car/Boat/ Plane dealership

6. Electronics (wholesale)


7. Travel Agency

8. Used Car sales

9. Telemarketers

10. Providers of telecommunications service, internet café, IDD call service, phone cards, phone

center

11. Dot-com company or internet business

12. Pawn shops

13. Auctioneers

14. Cash intensive business such as restaurants, retail shops, parking garages, fast food stores,

movie theaters etc.

15. Sole Practitioners or Law Firms (small, little known)

16. Notaries (small, little known)

17. Secretarial Firms (small, little known)

18. Accountants (small, little known firms)

19. Venture Capital companies

Indicative List of High/Medium risk Products & Services

1. Electronic funds payment services such as Electronic cash (e.g. stored value and payroll

cards) Fund transfers (domestic and international) etc.

2. Electronic banking

3. Private banking (domestic and international)

4. Trust and asset management services

5. Monetary instruments such as Travelers’ Cheque

6. Foreign Correspondent accounts

7. Trade Finance (such as letter of credit)

8. Special use of concentration accounts

9. Lending activities, particularly loans secured by cash collateral and marketable securities

10. Transactions undertaken for non-account holders (occasional customers)

11. Provision of safe custody and safety deposit boxed


12. Currency Exchange transactions

13. Project financing of sensitive industries in high risk jurisdictions

14. Trade Finance services and transactions involving high risk jurisdictions

15. Services offering anonymity or involving third parties

16. Services involving banknote and precious metal trading and delivery

17. Services offering cash, monetary or bearer instruments; cross-border transactions, etc.

Indicative List of High/Medium risk Geographies

Countries/Jurisdictions

1. Countries subject to sanctions, embargoes or similar measures in the United Nations Security

Council Resolutions (UNSCR)

2. Jurisdictions identified in FATF public statement as having substantial money laundering and

terrorist financing (ML/TF) risks (www.fatf-gafi.org)

3. Jurisdictions identified in FATF public statement with strategic AML/CFT deficiencies

(www.fatf-gafi.org)

4. Tax havens or countries that are known for highly secretive banking and corporate law

practices

5. Counties identified by credible sources as lacking appropriate AML/CFT laws, regulations

and other measures.

6. Countries identified by credible sources as providing funding or support for terrorist

activities that have designated terrorist organizations operating within them

7. Countries identified by credible sources as having significant levels of criminal activity

8. Countries identified by the bank as high risk because of its prior experiences, transaction

history or other factors (e.g. legal considerations, or allegations of official corruption)

http://www.fatf-gafi.org/

http://www.fatf-gafi.org/

VALUEFIN INDIA CREDIT SERVICES PRIVATE LIMITED KYC & AML ... AML Policy.pdf · 3.3 Officially valid...

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